Opinion
2 CA-CV 2024-0101
12-09-2024
JOHN CARL FAZIO AND REFLECTIONS AT THE BUTTES, L.L.C., Plaintiffs/Appellants, v. SADDLEBROOKE HOMEOWNERS ASSOCIATION #2, INC.; DAMON WILLIAMS; AND PATRICK CARLIN, Defendants/Appellees.
May, Potenza, Baran &Gillespie P.C., Phoenix By Jason M. Covault Counsel for Plaintiffs/Appellants Smith & Wamsley PLLC, Tucson By Jason E. Smith and Sean K. Moynihan Counsel for Defendants/Appellees
Not for Publication - Rule 111(c), Rules of the Arizona Supreme Court
Appeal from the Superior Court in Pima County No. C20202480 The Honorable Wayne E. Yehling, Judge
May, Potenza, Baran &Gillespie P.C., Phoenix By Jason M. Covault Counsel for Plaintiffs/Appellants
Smith & Wamsley PLLC, Tucson By Jason E. Smith and Sean K. Moynihan Counsel for Defendants/Appellees
Judge Vasquez authored the decision of the Court, in which Presiding Judge O'Neil and Judge Kelly concurred.
MEMORANDUM DECISION
VASQUEZ, JUDGE
¶1 John Fazio and Reflections at the Buttes Limited Liability Company (Reflections) appeal from the superior court's grant of partial summary judgment and award of attorney fees in favor of Damon Williams, Patrick Carlin, and SaddleBrooke Homeowners Association #2, Inc. (collectively, "Association"). On appeal, Fazio and Reflections argue the court erred by failing to view the evidence in the light most favorable to them when granting summary judgment. They also argue that the court abused its discretion by refusing to consider the financial hardship the award of attorney fees and costs would cause Fazio and by denying their motion for a new trial. For the following reasons, we affirm.
The notice of appeal does not list the superior court's November 1, 2023 order granting partial summary judgment. Generally, a notice of appeal must list the orders from which the appellants seek to appeal. Ariz. R. Civ. App. P. 8(c). However, parties need not list all interlocutory orders "involving the merits of the action and necessarily affecting the judgment . . . and all orders and rulings assigned as error." A.R.S. § 12-2102(A); see Dowling v. Stapley, 221 Ariz. 251, n.12 (App. 2009) (appeal from final judgment permits review of otherwise non-appealable interlocutory orders). Accordingly, we address the merits of the arguments concerning the court's November 1, 2023 order.
Factual and Procedural Background
¶2 We view the facts and all reasonable inferences in the light most favorable to Fazio and Reflections, the parties that opposed summary judgment below. See Modular Mining Sys., Inc. v. Jigsaw Techs., Inc., 221 Ariz. 515, ¶ 2 (App. 2009). However, the relevant facts are undisputed. Fazio was the managing member of Reflections, a wedding planning business. The Association is a non-profit corporation that governs the SaddleBrooke Homeowners Association No. 2 planned community and operates various facilities on the property for the benefit of its members and the public, including event venues. In January 2017, Fazio contacted SaddleBrooke's food and beverage director, Don Brouhard, to discuss marketing materials for an upcoming bridal fair. At some point, Brouhard offered Fazio a position at SaddleBrooke as the banquet and events manager, which Fazio accepted.
Sometime after SaddleBrooke hired Fazio, Brouhard was no longer employed at SaddleBrooke and Carlin replaced him as the food and beverage director.
¶3 Shortly thereafter, SaddleBrooke's general manager, Williams, learned that Fazio was marketing events at SaddleBrooke with materials that also marketed Reflections. Fazio had been scheduling weddings at SaddleBrooke using Reflections's contracts that directed clients to make payments to Fazio or Reflections. In February 2017, Williams presented Fazio with a list of employment conditions ("February memo"), which Fazio signed. In part, the February memo prohibited the "marketing of [SaddleBrooke] in any of [Reflections's] marketing materials"; required Fazio, in his position as banquet manager, to use SaddleBrooke's "contracts and pricing in all endeavors"; and prohibited him from "accepting any other monies from clients." In a separate conversation, Williams told Fazio that SaddleBrooke "do[es] not co-market, period."
¶4 In September 2017, SaddleBrooke terminated Fazio's employment, in part, because Fazio continued to operate Reflections on SaddleBrooke's premises, including using Reflections's contracts to book weddings and receive advance payments from wedding clients. Fazio was no longer permitted on the property after his termination, so all previously scheduled weddings were performed solely by SaddleBrooke staff. Although Fazio had received advanced payments for these weddings, he did not remit any payment to SaddleBrooke for its expenses. Consequently, Williams reported to the police that Fazio had stolen money from the Association and also filed a related insurance claim. Fazio was arrested and subsequently indicted. The Pinal County Attorney's Office ultimately dismissed the charges.
¶5 Fazio and Reflections sued the Association for malicious prosecution, conspiracy to commit malicious prosecution, libel for making a false statement to the insurance company, intentional infliction of emotion distress, tortious interference with Reflections's wedding contracts, breach of the contract they entered into with SaddleBrooke to "promote and provide wedding services" at SaddleBrooke, and breach of the implied covenant of good faith and fair dealing. The Association moved to dismiss all but the malicious prosecution claim. The parties stipulated to dismiss the conspiracy claim and the superior court dismissed the tortious interference and libel claims.
Initially, Fazio individually filed a complaint alleging that the Association and three other defendants were liable for defamation, libel, intentional infliction of emotional distress, and tortious interference with several wedding contracts. These three other defendants were dismissed with prejudice by stipulation. Pursuant to stipulation, Fazio filed an amended complaint alleging the causes of action listed above and adding Reflections as a plaintiff.
In its minute entry from the hearing on the Association's motion to dismiss, the superior court granted the Association's motion "in part" as to the libel claim. After the court's grant of partial summary judgment on the remaining claims, it noted that during this hearing the libel claim was "dismissed in open court." On appeal, neither party raises an issue as to the disposition of the libel claim, and, thus, we do not address it.
¶6 Then, in two separate motions, the Association moved for summary judgment on the remaining counts, which the superior court granted. After the Association filed its application for attorney fees, the court entered final judgment which included an award for attorney fees. The court awarded the Association $80,000 of its requested $145,355.92 attorney fees. The court reasoned that this award "properly apportion[ed] the fee and fairly compensate[d the Association] for the work related to the contract claims" given that the basis for the request was under A.R.S. § 12-341.01, which permits a court to award fees in "any contested action arising out of a contract." The court noted that "in doing so," it had "not considered [Fazio and Reflections's] argument regarding hardship."
¶7 Fazio and Reflections subsequently filed a motion for a new trial, arguing the Association's attorney fee affidavit disclosed a conversation between the Association and Brouhard, which constituted newly discovered evidence. They also argued that the superior court had erroneously found the February memo terminated any agreement Fazio and Reflections may have had to co-market weddings and then relied on that erroneous finding in granting summary judgment. They further contended the court erred by "offer[ing] no reason why it disregarded [their] hardship" argument when awarding attorney fees. The court denied the motion. We have jurisdiction under A.R.S. §§ 12-120.21(A)(1) and 12-2101(A)(1), (5).
Fazio and Reflections filed a notice of appeal challenging the superior court's judgment after they filed the motion for new trial but before the superior court ruled on the motion. This court stayed the appeal pending the superior court's ruling on the motion for new trial. The appeal was reinstated thereafter.
Discussion
I. Breach of Contract and Breach of Implied Covenant of Good Faith and Fair Dealing Claims
¶8 Fazio and Reflections contend the superior court erred in granting summary judgment on their breach of contract and breach of the implied covenant of good faith and fair dealing claims by improperly viewing the February memo in the light most favorable to the Association, the moving party. They maintain the memo constituted a breach of the implied covenant because the Association had no right to terminate an enforceable co-marketing agreement without permitting Fazio and Reflections to receive the expected benefits therefrom.
¶9 We review a court's grant of summary judgment de novo and will affirm when "there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law." Kalway v. Calabria Ranch HOA, LLC, 252 Ariz. 532, ¶ 9 (2022) (quoting Ariz. R. Civ. P. 56(a)). Summary judgment is appropriate if the moving party demonstrates that "no evidence exist[s] to support an essential element of the claim." Orme Sch. v. Reeves, 166 Ariz. 301, 310 (1990). And, "[i]f the party with the burden of proof on the claim or defense cannot respond to the motion by showing that there is evidence creating a genuine issue of fact on the element in question, then the motion for summary judgment should be granted." Id.; see Ariz. R. Civ. P. 56(e) (adverse party's response must "set forth specific facts showing a genuine issue for trial").
¶10 In granting summary judgment on these counts, the superior court found that the February memo "constituted a de facto termination of any co-marketing agreement" between Reflections and SaddleBrooke. We agree. In their first amended complaint, Fazio and Reflections asserted they had an agreement with SaddleBrooke under which Fazio could "manage and promote" Reflections, including marketing SaddleBrooke's Mountain View Club as the "preferred wedding reception venue" of Reflections. As part of this "co-promotion arrangement," clients would "enter into a written contract" solely with Reflections, and Reflections would then pay SaddleBrooke "for the food and beverage." The February memo expressly and unambiguously prohibited Fazio or Reflections from marketing SaddleBrooke facilities in any of their marketing materials, directly billing third parties and reimbursing SaddleBrooke, accepting monies from clients, and using any other contracts and pricing besides SaddleBrooke's. The February memo specified the "additional requirements" of Fazio's position as a Banquets/Events Manager. The memo, signed by Fazio and Williams, necessarily terminated any prior co-marketing contract.,
Fazio and Reflections assert on appeal, as they did below, that when Fazio signed the February memo, he "stapled to it his own memoranda showing the evidence of the existence of the contract and disputing that SaddleBrooke could unilaterally terminate." There is no evidence that such memoranda existed. Even if there had been a document that "clarified all food and beverage" would go through SaddleBrooke and "everything else" would go through Reflections, Fazio also conceded that the co-marketing contract had no term and could have been "terminated . . . at any time."
As they did below, Fazio and Reflections argue that the February memo "does not in any way bind Reflections" to its terms because (1) only Fazio, not Reflections, signed the memo and (2) the company named on the memo was "The Buttes at Reflections, LLC" and not "Reflections at the Buttes, LLC." These arguments are meritless. First, Fazio testified that as the sole managing member of Reflections, he considered himself one and the same with Reflections. Second, Fazio appears to concede Williams did not have a clear understanding about the different corporate entities because three months after the February memo, Fazio created a document for SaddleBrooke's management that explained the similarly-named corporate entities-Reflections at the Buttes, Reflections Resort Weddings, The Buttes by Reflections, and The Buttes at Reflections. Although the February memo does not accurately name any of Fazio's affiliated business entities, it is clear that SaddleBrooke intended to prohibit Fazio and Reflections from any further co-marketing activities. Although Fazio now disagrees that the February memo terminated any prior co-marketing contract, it appears he recognized SaddleBrooke's intent at the time of signing.
¶11 Fazio and Reflections nonetheless argue that the February memo establishes a genuine dispute over the existence of a co-marketing contract, because if a contract did not exist, then SaddleBrooke would never have had Williams create the memo to terminate it. As such, they contend the superior court failed to consider whether Fazio and Reflections established that SaddleBrooke prevented them from receiving the benefit they had bargained for with Brouhard. Specifically, whether SaddleBrooke prevented Fazio and Reflections from receiving $30,000 from sixteen weddings that had been scheduled "before and after" the February memo. In support of this contention, Fazio and Reflections cite to Fazio's deposition testimony. Fazio's testimony, however, is unclear as to the precise benefit set forth in any agreement that may have existed before the February memo. Fazio testified that, at the time his employment was terminated, he was SaddleBrooke's client on "[sixteen] yet-to-be-completed weddings." He also testified that there was an "expectancy" under the co-marketing contract of performing seventy-five to ninety weddings per year, he expected to receive roughly $30,000 from "twenty [of those] weddings," and he estimated there were ten weddings that could not change their venue because they were too "far along in the process." But conclusory, "[s]elf-serving assertions without factual support in the record will not defeat a motion for summary judgment." See Florez v. Sargeant, 185 Ariz. 521, 526 (1996) (quoting Jones v. Merchs. Nat'l Bank &Tr. Co., 42 F.3d 1054, 1057 (7th Cir. 1994)).
¶12 Fazio and Reflections produced corroborating evidence for only one wedding that SaddleBrooke had prohibited them from completing. The record indicates there were additional weddings that Fazio and Reflections had booked, but SaddleBrooke performed.However, based on our review of the record, there are only two additional weddings for which sufficient details were provided that allowed the superior court to evaluate whether Fazio and Reflections were prevented from receiving any benefit from a co-marketing contract. Because these three weddings were scheduled after Fazio had signed the February memo, the breach of contract and implied covenant claims necessarily fail. Any bargained-for benefit that Fazio and Reflections may have had under a co-marketing contract no longer existed after the February memo.
There are cancelled checks made payable to either Fazio or Reflections for certain other weddings. Some checks are dated before the February memo, but these are for the weddings that Fazio and Reflections had completed prior to Fazio's termination. The remaining checks are dated after the February memo. The reasonable inference, therefore, is that these other weddings were likewise scheduled after the February memo.
¶13 Fazio and Reflections next argue that "Fazio's separate role as an employee does not give SaddleBrooke the right to terminate an unrelated contract." They cite no authority, and we are aware of none, that support this argument. Regardless, Fazio and Reflections acknowledge the co-marketing contract "had no specific term." Any contract was therefore terminable at will, and, consequently, no breach occurred. See Roberson v. Wal-Mart Stores, Inc., 202 Ariz. 286, ¶ 15 (App. 2002) (either party may generally terminate an at-will contract "at any time for good cause or no cause without incurring any liability").
¶14 In sum, the superior court did not err by granting summary judgment on the breach of contract and breach of implied covenant of good faith and fair dealing claims.
II. Malicious Prosecution Claim
We recognize that civil malicious prosecution is more properly referred to as "wrongful institution of civil proceedings." Giles v. Hill Lewis Marce, 195 Ariz. 358, n.1 (App. 1999). Because the parties and the superior court used the term malicious prosecution, so do we.
¶15 Fazio and Reflections argue the superior court erred by "finding facts and inferences in favor of movants" and by reasoning that the Association was not malicious in having Fazio arrested "if there was good reason" to do so. In order to prevail on a claim of malicious prosecution, the plaintiff must prove: (1) "that a prior prosecution terminated in favor of the plaintiff, [(2)] that the defendant was the prosecutor, [(3)] that it was actuated by malice, [(4)] that there was no probable cause[,] and [(5)] that damages were sustained." Frey v. Stoneman, 150 Ariz. 106, 109 (1986). On appeal, as below, Fazio and Reflections focus exclusively on the probable cause and malice elements.
¶16 In the context of malicious prosecution, probable cause means "a reasonable ground of suspicion, supported by circumstances sufficient to warrant an ordinarily prudent man in believing the accused is guilty of the offense." Gonzales v. City of Phoenix, 203 Ariz. 152, ¶ 13 (2002) (quoting McClinton v. Rice, 76 Ariz. 358, 367 (1953)). The existence of probable cause is a complete defense to a malicious prosecution claim, and is a question of law to be determined by the court. Hockett v. City of Tucson, 139 Ariz. 317, 320 (App. 1983). The relevant question for the superior court to answer was whether the Association, under the facts it reasonably believed to exist at the time it contacted law enforcement, also reasonably believed SaddleBrooke had been criminally defrauded by Fazio and Reflections. See Bradshaw v. State Farm Mut. Auto. Ins. Co., 157 Ariz. 411, 417 (1988); see also Chalpin v. Snyder, 220 Ariz. 413, ¶¶ 32, 38 (App. 2008).
¶17 Fazio and Reflections argue that they alleged facts that, if true, proved the Association "wholly lacked probable cause." They argue that "SaddleBrooke never terminated the [co-marketing] agreement; instead[,] it created a false narrative about Fazio taking money without following SaddleBrooke's rules and terminated his employment, ignoring the agreement Fazio created with Brouhard." Then after prohibiting Fazio from entering the property to complete the scheduled weddings, the Association reported to law enforcement that he had been embezzling funds. They contend this was all part of a "plan to have Fazio arrested" in order to file an insurance claim to "cover the shortfall from the weddings that [Williams] knew he could not complete without Fazio" after Fazio was terminated. Based on these facts, Fazio and Reflections maintain it was improper for the superior court to have "collapsed the entire analysis down to whether Fazio signed the February [memo] and disposed of probable cause on that basis alone." We disagree.
¶18 Reflections and Fazio's argument relies on the continued existence of a co-marketing contract. But the February memo terminated such a contract as a matter of law. See Roberson, 202 Ariz. 286, ¶ 15. In other words, any activities conducted by Fazio and Reflections under the purported marketing agreement that were inconsistent with the terms of the February memo were no longer permitted under the memo's terms. It is undisputed that after Fazio and Reflections signed the February memo, they (1) received payments for wedding services directly from clients, (2) did not use SaddleBrooke contracts when scheduling weddings, and (3) did not remit payment to SaddleBrooke for the three weddings SaddleBrooke ultimately performed and for which Fazio and Reflections had received advanced payment. Because Fazio and Reflections continued to conduct business in a manner expressly prohibited by the February memo Fazio had signed, it was reasonable for the Association to believe that Fazio and Reflections were defrauding it under the memo's terms. We therefore conclude that the superior court correctly found that probable cause existed as a matter of law.
Because the existence of probable cause is a complete defense to a malicious prosecution claim, we need not consider Reflections and Fazio's malice argument. See Hockett, 139 Ariz. at 320. In any event, their argument largely turns on whether the February memo terminated any co-marketing agreement, which has been discussed above.
III. Intentional Infliction of Emotional Distress Claim
¶19 Fazio and Reflections contend the superior court erred by "weighing disputed facts and granting all inferences" in favor of the Association when it found that the Association's conduct did not rise to the level of what "a reasonable personal would consider . . . outrageous." The court noted that the Association's actions may have been "harsh," but they were "not outrageous" because the Association "had a strong basis for believing that . . . Fazio acted without legal or contractual authority and engaged in a scheme to defraud the association."
¶20 As a threshold matter, Fazio and Reflections do not provide "citations to supporting legal authority" to support their contention. See Ariz. R. Civ. App. P. 13(a)(7). Moreover, although they contend their allegations prove the Association's conduct was "utterly outrageous and unjustified," they fail to cite to the portions of the record that support this assertion. See id.; see also Ritchie v. Krasner, 221 Ariz. 288, ¶ 62 (App. 2009) ("Opening briefs must present and address significant arguments, supported by authority that set forth the appellant's position on the issue in question."). We therefore deem this argument waived.
IV. Punitive Damages
¶21 Fazio and Reflections argue that the superior court erred by "mak[ing] its own factual determinations" and entering summary judgment on their request for punitive damages. However, punitive damages are a remedy, not an independent cause of action. See Medasys Acquisition Corp. v. SDMS, P.C., 203 Ariz. 420, ¶¶ 17-19 (2002). Because Reflections and Fazio failed to prove an underlying tort, they are not entitled to punitive damages. See Saucedo ex rel. Sinaloa v. Salvation Army, 200 Ariz. 179, ¶ 11 (App. 2001) ("The requisite intent and outrageous and egregious conduct must occur in tandem with the conduct giving rise to the injury in order to recover punitive damages.").
V. Motion for a New Trial
¶22 Fazio and Reflections contend the superior court erred in denying their motion for a new trial on the basis that the Association's "nondisclosure of Brouhard was immaterial." After the court entered summary judgment as to all claims, the Association submitted its attorney fees application. It included the following entry: "Teleconference with Donn Brouhard, a critical fact witness involved in hiring John Fazio at the insured, to discuss what he recalls from the hiring process and other factual details from his time working with Fazio." In their motion for a new trial, Fazio and Reflections stated they had been "surprised" to learn the Association had a conversation with Brouhard, believing neither party could locate him. They argued that the Association failed to "properly disclose that Brouhard had been found and the substance of the[] conversations with him."
¶23 In response, the Association argued that Brouhard's statements were within the scope of SaddleBrooke's attorney-client privilege and that it had been "upfront and open" about this in their disclosure statements by listing Brouhard's contact information as in "care of" undersigned counsel. They maintain that although he had been categorized as a "crucial" fact witness on the question of contract formation, he did not provide the Association with any new information, and "as the case developed" it became clear that "the question of contract formation between Mr. Brouhard and Mr. Fazio was not material to the disposition of this case."
¶24 To be entitled to a new trial based on newly discovered evidence, the moving party must show that "the evidence (1) is material, (2) existed at the time [the court entered summary judgment], (3) could not have been discovered before [the entry of summary judgment] by the exercise of due diligence, and (4) would probably change the result at a new trial." Waltner v. JPMorgan Chase Bank, N.A., 231 Ariz. 484, ¶ 24 (App. 2013). We review the denial of a motion for new trial for an abuse of discretion. Paz v. City of Tucson, 256 Ariz. 391, ¶ 16 (App. 2023).
¶25 Fazio and Reflections maintain the phone call between Brouhard and the attorney was material because, without Brouhard's testimony, the superior court was unable to "properly evaluate[] whether the February [memo] was, in and of itself, bad faith by SaddleBrooke" when it concluded that "no contract existed." But in denying the motion, the court stated that "any additional information from the phone call . . . was not material" because (1) "deposition testimony or an affidavit would have been duplicative" of the emails purporting to prove a contract was formed and (2) its grant of summary judgment "did not turn on the question of contract formation between Brouhard and Fazio." And contrary to Fazio's argument, the court did not conclude that no contract existed; it concluded that determining whether there was a Fazio/Brouhard contract was unnecessary because the February memo "constituted a de facto termination of any co-marketing agreement" between them. Therefore, whether Fazio and Brouhard had an agreement would not have changed the result. Moreover, Fazio and Reflections claimed that the knowledge of the telephone conversation would have led them to depose Brouhard, but they never attempted to do so, despite including him as a witness in their supplemental disclosure statement. In sum, the court did not abuse its discretion in denying the motion for a new trial because Brouhard's testimony was neither material nor likely to change the result.
VI. Attorney Fees
¶26 Fazio and Reflections argue the superior court erred by "elect[ing] not to consider the extreme hardship" that the attorney fee award would cause Fazio, despite Fazio and Reflections specifically raising the issue. Because Fazio and Reflections fail to support their argument with any citations to relevant legal authority or sufficient citations to the record, we could deem this argument waived. See Ariz. R. Civ. App. P. 13(a)(7) (argument section must contain "citation to supporting legal authority" and "appropriate references to the portions of the record on which the appellant relies"); Ramos v. Nichols, 252 Ariz. 519, ¶ 8 (App. 2022) (arguments not supported by adequate explanation or authority are waived). However, even assuming the argument is not waived, the superior court did not err.
¶27 The superior court awarded the Association $80,000 in attorney fees. Although the Association requested $145,355.92, the court concluded that much of this amount was related to the claims based in tort and, thus, was not eligible for an award under A.R.S. § 12-341.01. In a footnote, the court stated that in awarding this reduced amount it "has not considered [Fazio's] argument regarding hardship." But in its ruling on Fazio's and Reflections's motion for a new trial, the court provided further explanation as to why it awarded that amount. The court acknowledged that although it had the discretion to consider Fazio's hardship argument, it declined to do so because he had not presented sufficient evidence, "such as financial affidavits," to prove a hardship. See Woerth v. City of Flagstaff, 167 Ariz. 412, 420 (App. 1990) ("[T]he party asserting financial hardship has the burden of coming forward with prima facie evidence of financial hardship.").
¶28 Fazio points to the portion of his separate statement of facts in which he argues he was unable to restart a wedding business after SaddleBrooke terminated his employment. He also states that the only post-termination work he had been able to do, while also caring for his adult son with special needs, was driving for a ride-share service. These facts were supported solely by Fazio's deposition testimony, which the superior court deemed insufficient. We cannot say the court abused its discretion in so finding.
VII. Attorney Fees and Costs on Appeal
¶29 Both parties request attorney fees on appeal under § 12-341.01 and Rule 21, Ariz. R. Civ. App. P. In our discretion, we deny their requests. As the successful party on appeal, the Association is entitled to its costs upon compliance with Rule 21. See A.R.S. § 12-341.
Fazio and Reflections additionally cite to the "CC&Rs" as the basis for their attorney fees and costs award. However, they do not provide a copy of the CC&Rs or reference where within that document they would be entitled to such an award.
Disposition
¶30 For the reasons stated above, we affirm the superior court's grant of partial summary judgment and its award of attorney fees in favor of the Association. We also affirm the court's denial of Fazio and Reflections's motion for a new trial.